NZIER estimates non-tariff measures against trade cost $8.4 billion a year
Opponents of free trade are quick to count the cost of cheaper goods on local jobs.
But they ignore the other side of the equation: the cost to New Zealand workers and producers to barriers put up by other countries.
At their most basic level, FTAs aim to reduce tariffs – the direct imposition of taxes on imported goods. But non-tariff measures (NTMs) have a much greater impact on returns to producers and cost to consumers.
The NZIER also reckons the overall cost of NTMs within Apec – covering 21 economies including China – is estimated to be $US790 billion – three times as much as the costs associated with simple border tariffs.
This gives some idea of the benefits that would have flowed from the Trans Pacific Partnership (TPP), which covers 12 Apec members and would have reduced some 18,000 tariffs not to mention the many NTMs.
NTMs are defined as policies aside from border tariffs that governments impose to limit imports or increase their price. Common examples are quotas, technical standards and animal welfare measures.
The high costs of protection
NZIER deputy chief executive John Ballingall says some are for legitimate public policy purposes, such as protecting consumers from dangerous products or protecting animal or plant safety.
“But many are blatantly protectionist in nature – designed to shield domestic industries from foreign competition,” he says.
New Zealand’s primary sector exporters bear the brunt of Apec economies’ NTMs, the report says
“The dairy sector alone faces NTMs within Apec of $US2.7 billion per year”, Mr Ballingall says. “Our beef and horticultural sectors suffer, too, facing additional costs of $US770 million and $US310 million respectively each year.”
The total impact on New Zealand is $US5.9 billion ($8.4 billion) a year. The NZIER says reducing the costs of NTMs will improve competitiveness and living standards – but concerted effort is required
“There is growing recognition amongst firms, policymakers and researchers that much more needs to be done by governments to address the high costs of NTMs,” Mr Ballingall says.
“The priority should be on those NTMs that are most trade-distorting and inefficient. But even the most well-intentioned or legitimate NTMs can be costly.
"Even a small decrease in the costs of NTMs in the Apec region would improve Apec businesses’ competitiveness and lower the costs of doing business. Ultimately this will benefit consumers through cheaper prices for traded goods and services.
“We hope that by shining a light on the costs of NTMs, our research can spark further discussions about the types of institutions and processes that could be used to reduce their most damaging effects."